S&P assigns Quest B-, loans B-, CCC+

S&P said it assigned B- ratings to Quest Software US Holdings Inc. and its planned $2.71 billion first-lien term loan. Concurrently, the agency gave Quest’s planned $865 million second-lien term loan a CCC+ rating. The recovery ratings for the first-lien debt and second-lien debt are 3 and 5, respectively. Quest also plans to secure a $400 million revolver, which the agency assigned a B- with a 3 recovery rating. The revolver is expected to be undrawn at close.

Clearlake Capital agreed to acquire Quest for $5.36 billion and will use the new loans to fund the deal.

“This transaction will considerably increase Quest's debt burden, but free cash flow should remain positive. This transaction will raise the debt balance at Quest Software–previously rated under the holding entity Seahawk Holdings Ltd.–to approximately $3.6 billion, up from about $2.1 billion under the old capital structure. This new debt increases our forecast for fiscal 2023 leverage to about 9x and is the primary driver of the lower rating under the new ownership and capital structure,” S&P said in a press release.

The outlook is stable, indicating reflects the view Quest’s leverage will decline modestly to below 10x over the next 12-18 months, based on a full year of revenue and synergies gained from recent acquisitions, the agency said.

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